If you're putting together a
syndication or fund, you may be

worried or maybe you already
have this situation where you

have an investor who wants to
get their money out before the

end of the fund or the
syndication itself. It could

either be part of a redemption,
or they just have some sort of

life event and need to get out
and want to get their money

back. How do we deal with that?
What does a syndication attorney

think about it? Well, let's talk
about it.

When I have a client come to me
and we start putting together

their package of their operating
agreement and subscription

agreement and private placement
memorandum, one of the items we

always discuss is whether or not
there should be an included what

we call redemption. So a
mechanism for the investor to be

able to get their money back is
just a normal part of the

transaction in the fund. If that
works in the context of their

fund, typically, it's happens in
a fund and not in a syndication,

then we'll build that in. But
many times it doesn't work

within there. And so there is
this general concern about what

happens. Certainly, it's a
question that investors may ask.

Now, I should do an aside here,
and that aside is this. So as

part of Regulation D, there is a
prohibition on resale. So first,

let's talk about what exactly
that means. What the SEC is

trying to prevent is it's trying
to prevent investors being able

to create a market themselves.
So they don't want to make it so

that I'm buying a part of your
syndication, in order to

basically create a market and
start selling these out as it

appreciates the value. So that
probably behavior is prohibited,

but behavior of selling your own
shares, or your own units or

whatever it whatever
denomination is, in your end is

typical, and it happens very
frequently.

Now, as I said, this is part of
a redemption, or it may be

something that's something else.
So if there is no redemption

itself, normally, we'll look at
the operating agreement itself

and determine whether or not
there's a what's called a right

of first refusal. If there's a
right of first refusal, what

typically will happen is the
investor will say, I found my

friend Joe Smith, they would
like to be able to buy my units

for $1,000 a unit, before Joe
Smith can go ahead and buy those

before the manager could approve
them. The manager needs to take

those and then look at the
language of the right of first

refusal. So it might be that the
company has the right of first

refusal. Or it might be that the
managers habit, or it might be

that all the investors have it,
or it might be some combination

of the three. If there is that
right, it needs to follow the

rules that are dictated in the
operating agreement to give that

right to whoever is identified,
so that they can purchase them

for that negotiated price that
the investor who wants to get

out we'll do. Now if there isn't
a right of first refusal not to

worry, the investor still has
the right to sell. But most of

the time, probably all of the
time, the manager has the right

to approve or disapprove whether
or not the new person is able to

come into the fund itself. Now
if they have that, then we there

should be a some discussion in
order to do it. Now, it's

definitely a best practice to
for managers and sponsors to

work with their investors when
they want to sell their units.

Not only because they give
better service to bad investor,

and prohibit any sort of
complaints, any sort of

complaints are much less likely
in that situation. But also

because your investors may want
more shares, if you've been

doing a good job, they probably
do want more of the deal that

you're working on. So that just
makes you more valuable in their

eyes as well. So if if this
happens, you should do a lot of

coordination with that investor,
to make sure that everything's

happening in a manner not only
that's compliant with the

operating agreement, but with
really the best interest of all

of the investors. When it
happens. If it happens with some

third party, it'll typically
look like an agreement is

written between those two
people. And then you will as

manager will basically sign off
on it and say I've approved this

transaction. So I hope that
helps. Again, when you look at

this when this happens to you,
and it happens in the year Every

syndication at some point, don't
fret. There are solutions to it.

There is solutions for your
investor. They don't need to be

freaking out and torn in terms
of how it's going to happen. You

can help them and best thing to
do really is give your

syndication attorney a call. If
that's me, we're always happy to

help.